tv Bloomberg Markets European Open Bloomberg January 29, 2018 2:30am-4:00am EST
five year yield, hitting 0% for the first time since 2015. while eu minister sign off on the brexit transition period, the prime minister comes under pressure for her own party. how long can sterling hold on to the recent gains. and metals shine. ckel rallies to a three-year high. how strongly european miners the? there will open this morning, matt. matt: we are less than 30 minutes with from the start of cash trading and we are looking at features that point to gains across the board. equity index futures are up in london right now only about 0.2%, not much more on the cac and dax. nonetheless, we are looking at gains from the-year-old stoxx 50 to the ftse and ibex 35. look at the german five-year yield up in my terminal here. i have a chart of five-year
yields. you can see that right now we have gone back up to just about 0%, the highest level we have seen since mid-2015. bonds are getting sold off, not just five-year bonds, but bonds across the sector. what do you see on the gmm? guy: there are many interesting things to talk about this morning. on friday, markets were reasonably well bid. this morning the chinese complex has sold off of. the ecsi is down by nearly 2% this morning. there does not seem to be an obvious trigger for it, but we do see it coming under pressure. that is the first story. foreign exchange, this does not have the majors on it because i had to broaden it out, but we will continue to watch what happens with the euro. it'll be interesting to see how that trade throughout the day as 's in europe -- as bonds ine
europe selloff. we see the french curve. we have belgium and austria with a lot of incredible action across europe. you will see pretty much across the entire curve of. the metals complex is strongly bid in asia overnight with etc., pushing higher this morning. i will that rippled through into the european miners, and into the ftse 100? i think that will be one of the more interesting stock stories we have to focus on. let's get a bloomberg first word news update with juliette saly. juliette: theresa may is fighting on multiple fronts today as critics insider governing conservative party end plans forp brexit and premiership. fire philipd to
hammond, who they believe is plotting to deny them the clean, quick break they want. even donald trump has been critical of the handling of brexit, saying he would have taken a "tougher stance with the eu." meanwhile, the leader of the opposition party has raise the issue of a another vote on brexit. >> what we asked for and parliament --ink it has been a meaningful vote in parliament by the end of this. what happens with this bill? we're not asking for a second referendum. b governinghe ec council member says the bank must end qe as long as possible. the program has done what was anticipated and there's not a single reason for continuing with it. draghi saidrio
there were rises in inflation. write off this federal reserve meeting as a nonevent. they expect a slightly hawkish upgrade of the language. this will be janet yellen's last meeting as fed chair. been erased,s have since alwaleed bin talal was released of the weekend. the billionaire, who also owns in citigroup and twitter, returned home on saturday after reaching an agreement with authorities. celand's to pry minister says her country's decision to force companies to pay men and women the same is the first step in gender equality. she made the comments during an exclusive interview with bloomberg. revolutionize and
iceland. it has been an eye-opener for us to. it affects every sector in society. women are describing their experiences and it shows how ridiculous this inequality is. metoo is not just about sexual harassment. it shows of the inequality in power in society. juliette: global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. this is bloomberg. thank you very much. joining us live from singapore is mark cudmore, our bloomberg mliv strategist. mark, we are looking at bond yields. surged and we are looking at german five-year
real coming up 20% for the first time since 2015. the 10 year and 30 year are on the air, but it does not matter where we look. in the u.s. we sealed surging and in japan we sealed surging. what is going on? it cannot all be due to knot of the ecb. but it is is not, being let out of the u.s., the treasury moves there. and perhaps the move in the two yea isr most exciting. that is incredible move in under five months or so. it has been nearly a straight line, and same with volatility. incredible, real tightening in the u.s.. that is getting through to other countries. where they are not seeing inflation come through. people are driving up yields because they seek marty prices going higher. i think that is the slight problem with this narrative. marty's prices are not going too high.
-- commodity prices are not going to hide. this?hat is behind thisoving it my gmm screen morning and i have all of these metals moving to the upside. what is driving that? the mental story is one of those -- what is driving that metals move? >> one part, the dollar weakness, helps them rise. they are rising on the day in genuine terms. there is a bit of excitement that trump might not be as focused on the infrastructure plan at the state of the union. if he does shift the narrative, now he has got tech policy done, next up is infrastructure. and he will hike up the fact that he has proven himself with tax policy. he did get it delivered by the end of the year as promised. that is helping metals rise and
have this the still ongoing solid growth story in the background. data from the u.s. on friday, the headline number is weak and the overall report was strong. the device the idea that u.s. growth is going very well and global growth is moving very well. manus: we also have a number of -- i mean, he was talking about the fact that there was no reason left quantitative easing. i wonder if draghi is having a go at him today. but even last week, draghi said inflation was getting closer to target. kuroda in davos said they were getting closer to 2%. there is a global central bank feeling that inflation is increasing, isn't there? >> yes, but part of the is what they will want to pursue. if you dick groat's comments, the -- if you take his commeb
nts, on friday he was speaking english. hisas not suddenly changing view during those three days that japan was close to reaching the target. and they are not going to reach the target for the next couple of years. is forecast easecb for 2019. it is only 1.6%. so, neither of those countries look what they will get sustainably to their targets within the next couple years. but traders are excited at the moment about normalization. i think there is a slight worry that we are getting some real rate tightening in the globe at a time when yes, this positive i .ol guy: mark cudmore, thank you very much indeed. joining us from our mliv team
european open on "bloomberg markets." juliette: sanofi has agreed to purchase ablynx for 3.9 million euros. the company will pay 45 euros a deal that cash in will give them the treatment for rare blood disorder. japanese cryptocurrency exchange coinshare will use its own capital to reimburse customers who lost money in friday's $400 million theft. they said they will repay all 260,000 users at a weight of 82 u.s. cents. japanese policymakers introduced legislation to prevent such disasters and put pressure on global crypto markets wary
arising scrutiny from regulators. shares of the chinese casino operation have fallen the most in a month in hong kong after allegations that the wynn macau chairman several he harassed women. morgan stanley and union gaming downgraded the stock after the massage therapist and former resort manicurist were accused of performing sexualized. on friday, shares in the u.s. parent fell 10% and fell the most in 13 months. left with crushing u.s. tariffs last year have been given a new lease on life. the enables them to start sales campaigns and the largest aircraft market. that is your bloomberg business flash.
juliette, and very much indeed. let's turn our attention to u.s. stocks. are they starting to overheat? only is it destroying reliable trade, but there will be an ominous sign for the rest of the market. let's bring our market for more. as a quote to the end of your piece, which you have written, which is nice, it comes from the cost analysis at nomura. you have been observing the panicked market. people have this fear of missing out, a lack of rationality. what is going on. >> exactly. this can feel like a wonky territory, but it is important to understand what the market is doing right now. the strategy says if you purchase stocks that don't trade as much and are less likely, you will make more money because there is a next her risk you are
investing in the most liquid stocks, you are making the most money on that trade since 2009. the reason that is troubling is because stocks traded very frequently should not be rising very fast. and liquidity should not necessarily go together. >> exactly. if they are trading frequently, there is a sense of panic in those shares. if it is not happening that way, then maybe a little bit of that same sentiment around that coin is happening. speculators are jumping into the market, trading these things quickly, being afraid of missing out and jumping into the shares and pushing them up the most since 2009. if there are speculators, they are likely to you as well. manus: you have got a chart -- oh, there it is.
9404, is bloomberg users want to check it out in the bloomberg library. dani, what does this mean for the rest of the market? why should they care about this? ofthose gains are coming off bear market lows. it is a very different environment we were in when the very look at shares were like looking at me. we do not have a lot of history. you can say that a lot for the u.s. market. the reason that they should be concerned is when you look at these stocks, which are gaining higher, it is chip makers carrying this higher. idea,u are relying on inv you should be aware that because of this chart, it is likely there are other investors who have been bidding this up, who are speculators essentially
and that first on a panic, might leave. a good sign of that was last week when texas instruments had a poor earnings report and the chipmakers in the u.s. fell by 2.4%. these things can sell off quickly. if it is in your portfolio, be aware of that. guy: give me a history lesson about what has happened previously. it is almost impossible to call any sort of bubble. but in terms of lessons to take away, if you look at things like the put=-call ratio, there is not a lot of hedging going on, which is odd when you are getting this high of a valuation . ofally there is some sense concern. the fact that we do not have hate to say there is fear of not having any fear, but there is a little bit of that and we have seen the vix pick up
slightly. tonight might be the time to consider taking some protection here. manus: thank you very much, dani burger with a look at the quant trends in the market. we are minutes away from the start of cash trading. just 10 minutes to go into the open. up next, we take a look at your stocks to watch, and that includes sanofi, which has agreed to purchase ablynx. there are other big movers in this market. stay tuned for that. this is bloomberg. the open, just 10 minutes away. ♪
guy: european stocks -- we are waiting the market open in six minutes time. let's couple let the stocks we should be focusing on this morning. joe, how is the market going to take the sanofi news? reporter: it is huge is for sanofi. novo-nordisk with a company that was seen to be purchasing this stock. it is a big shock for the market. move andthe shares to also, obviously sanofi as well.
3.9 billion euros, a massive deal for the market today. manus: i wonder about ams. we are seeing calls for this stock, which is a swiss electronics technology solutions stock. it could be up 25% at the open. what is the story? reporter: yes, this is a technology maker. they have a lot of big clients, like apple and companies like that. they issued this trading update, which the bank has taken very positively today. we are hearing very good calls on that. , a stock could rise 25% massive move up. the market has reacted very well to that this morning. guy: that is interesting, in burgerf whatd dani just told us on the quant stocks. if you are looking at what is
happening with gkn, how do you take some chips off the table question mark is a chips off the table story? has been well, melrose very aggressive during the situation and has been a very hostile move. a troubled company. and shareholders have really been looking forward to defending themselves. now the government is coming in. to me, it all depends on what they do now. i think this story has got a long way to go. i think the government coming in is just one element to it. i expect melrose to continue the aggressive pursuit of this company as they have done. very: joe easton, thanks much. if you want to know more about what is going on with stocks, check out first word on the bloomberg. now, we are going to come back
♪ guy: minister go until the start of cash trading in europe. individual names we need to be talking about. keep an eye on the metals stocks. , can't get there soon enough, unwinding the qe program. that has moved bond markets this morning. flat into the close. oil, still north of 70. metals, look at think, nickel overnight, very strongly bit. c, nickelt zin overnight, very strongly bid. this show you the wei
morning and give us the fair values this morning. generally, well bid. individual sectors could prove interesting this morning. let's take a look at the individuals. we will at the market settle that one out. we will see what happens to the minors. the other markets around europe, similar story. we have seen a big move already into the european bond market or out of the european bond market this morning. some of that has unwound a little bit, the selloff by fading a little bit. littleselloff fading a bit. he, reasonably well bid this morning. materials, the bright spot there. energy, not a lot going on there.
we will keep an eye on that. it strongly well bid as well. industrials, mixed. a reasonably strong story coming out of metals. matt, what are you seeing in stocks? 321 stocks trading up. 189 trading down. that is not as nice as friday for long investors. here, you see the losers though. because the market is trading just slightly down, novartis is one of the big losers. you see a lot of other defensive stocks on here as well. loser on here. these are the stocks you sell if you think you can take more risk. that may be the case today. you do see sanofi there.
only down a quarter of a percent. take a look at the upside. the leaders include airbus. we were talking about that company earlier. see siemens, boko santander. maybe some of the auto stocks will be doing well and more of a risk on trade, slightly down market this morning. as the european at the trade gets underway, let's introduce our guest for the next 40 minutes. he is the head of the u.k. investment office at ubs wealth management. on this continuing rally we saw last week, and it we are down an if
bit today on the stocks first hundred, we are look at the gainers on the riskier stocks and losers on the defensive stocks. when will investors get tired of getting into this market? >> i don't think they are getting tired at all. it is surprising optimism. it is more of taking a step back, looking at the data, the fundamentals and feeling more comfortable with it. it is something we would -- would encourage as well. right now, people feel confident. guy: equities have been driven higher by central banks. central banks are turning more hawkish. the punch bowl is going to be taken away. geoff: look at our financial conditions. markets notty
really reacting in a negative way. that is a flight normalization of fundamentals to justify current gains. matt: we will talk more about this equities market with our guest. he sticks with us for the next hour. by the way, if you are a bloomberg customer, you can watch our program using tv . you can follow on the charts and functions or use in the right-hand column. you can also message us directly. we usually get back to people right away. still to come, european earnings have got a macro mojo, but can the trend continuing 2018? fourth quarter preview is next. this is bloomberg. ♪ ♪
guy: 10 minutes into the trading day. european stocks on the front foot. good.logy looking it is a make or break challenge for europe. fourth quarter could be a positive catalyst for an increasingly lamenting driven market. so far, we have had a glimpse of your end earnings. lvmh is the one that stands out. joining us now, our guest. still with us, geoffrey yu.
what is the position coming into this report? >> this earnings season, the stakes are high. it is a momentum driven market. we need further earnings revisions to be able to lift the market higher. point arens at this for 5% sales growth, 11% earnings growth. if you look at the broad averages across the stoxx 600, it is driven by rebounds in areas like materials and energy, but consumer discretionary is robust. we will get things really moving this week with scandinavia, where you have a bevy of financials and industrials that kick things up. -- that kick things off. besides the baseline expectations, where do you see the biggest opportunity for upside? tim: i think the biggest
potential positives we need to be looking for, one is the industrial space. it is significant within any of the benchmark, and you have got the pmi and other indicators that are at record levels. there is a positive relationship with industrial activity and areas like machinery. the other space to look at our financials. we have seen an uptick in rates. we started to see a positive spread between the 10 and two-year, 10 and three month for europe, for example. that is positive for financials. significant the tech -- significant sectors, where the leverage is on the rates front. still muted dictations in terms of what is -- muted expectations from investors this year. guy: this is a busy chart, but
let's pop it up anyway. let's talk about the foreign exchange story. pretty noisy. things to take away, what is happening with the pound. walk us through the currency headwinds. tim: there are three lines within this spaghetti that are notable. turquoise and the that are upright, that is the pound and the euro. they are now the strong currencies globally. others and there are the yen, -- you want, franc swiss franc. the white line at the bottom is the dollar. the stoxx 600 is a benchmark. you have big european component that has 40% of their sales in america and asia.
for the ftse 100, approaching 60% of sales on average that are non-u.k., except this is a big deal. this creates a headwind to that , that is can offset manageable, but still a headwind. the pound has come back strongly. we will look at politics later. trading 124. is this a problem for europe? translationadline is an issue to look at for companies, but on the other hand, europe and the u.k., good at leveraging. whether central bank would be weaker. theseholding down euro-dollar and sterling on the trade weighted levels. now, the hope of the demand remains strong.
that helps with volume growth and on a national level. can i make a suggestion? in greenve the pound in the euro in blue, each country has a color that would make the spaghetti chart easier to understand. [laughter] that is just my chart suggestion of the day. i want to ask about inflation. now we have heard from kuroda. maybe there was loss of translation in davos about getting back on target. there seems to be a global phenomenon. how does inflation in fact stocks -- impact stocks? back to the comment
i made about the yields in general. inflation expectations are still relatively muted. a strong backed up in terms of demand, if you have got employment that is robust, if you have got commodities that stay at rebounded levels or move higher, which is not consensus, all of those could build inflation expectations further, which is part of the opportunity of seeing at least modestly higher intermediate-term interest rate. look aterm, if you interest rates relative to the markets, it is kind of oil and water. if we have moderately higher rates, that is ok. it can feed threw for financials, insurance companies. it is more of a sign of a positive economy than a concern, but if inflation starts to move
higher, this is a negative issue from this standpoint. guy: i want to get a sense of what we have seen thus far. i have auto-parts doing well this year. banks doing well. financial services, insurance, miners trading higher. if you look at the u.s., it is tech. tech is driving things. we were talking earlier about the momentum within the space. europe doesn't have that. how do we compensate? geoffrey: there are two things, underlying divergence, and right now you have technology, the core components and the way to view it -- of u.s. equity markets shows a different economy right now compared to what europe is. second, to compensate that, i think after we get stability
away from --, europe needs an investment strategy to catch up with the u.s. it has to be text, productivity. that is where europe needs to focus. matt: i want to ask about some stocks that are heavily weighted, especially in the u.k. the oil stocks don't seem to to theuite well compared underlying commodity. what will we see with those stocks? tim: it is an interesting thing. we have seen over the course of the past year the relative performance of the energy group. u.k. and probably across europe lagged out of the underlying benchmarks. oil has continued to take higher.
tick higher. the right allocation, the right moves in terms of recognizing the dynamic is changing, we think there is an opportunity you could see the energy sector piecuch up relative to the underlying benchmarks. you have seen a little bit of that momentum pickup in the last couple months. over the course of last year, it has been lagging. guy: thank you for coming to see us. tim craighead, bloomberg. he will join our colleagues on bloomberg radio now. one final wrapup. when you look at the backdrop of europe and you think about what is going on, the german economy looks completely out of sync with everybody else in terms of its cyclical story. europe when it in
have germany doing one thing and i have the rest of europe doing another? now, because of the global situation and global reflation, that is dragging everyone along. you are seeing above trend growth. you have seen risk premium reduced massively. there is a case for broad diversified investment in europe. -- euro goes begun beyond certain levels -- guy: germany is better than that. --germany is better at that than anyone else. geoffrey: absolutely. matt: geoffrey yu there, head of the u.k. investment office at
ubs wealth management. let's get our top stocks stories now of the day. for that, we go to nejra cehic. getting the most in almost a year. gaining the most in almost a year. we have seen a bit of feedthrough to other parts of the sector. , which hasng sanofi agreed to buy another company. potentialain a blockbuster for rare blood cutting diseases. -- a blood clotting diseases. vw also gaining them up 1.3%. it has had a double upgrade. analysts say it is making progress. guy: thank you very much,
check in first on the world map right now to see 21 minutes into the session how we are doing across the continent and in the u.k. can get this by typing in wm . anhave had a turnaround from overly positive open. we see spain and portugal are down. ireland is down. most of the core of europe is trading, little changed. there are slight gains. in france, 300th of 1% gained. poland, austria, switzerland, all gaining by just a bit, but not even a 10th of a percent, which is why they are gray. let's focus in on the u.k. e.u. ministers will meet in brussels today, and they may adopt a new set of brick -- said of directives brexit negotiations.
theresa may is fighting on critics fronts as threatened to opened her plans for brexit. still with us is geoffrey yu. not even internally, but even externally with the criticism of theresa may. donald trump in an interview with piers morgan said that he would have done things differently, would have been tougher in negotiations. how much does that affect the prime minister? take donald trump's criticism seriously in the united kingdom? geoffrey: probably in the u.k., that is something the prime minister would be no less concerned about. it is more within her own potter -- own party. think that is something that will be weighing on her mind as she flies to asia. the second thing to note is how the pound is actually not really responding to these political gyrations anymore.
one part is the positioning .tory hand, have we actually priced in the maximum amount of works premium -- of risk premium we can when it comes to the u.k.? guy: what do you? think is going on -- what do you think is going on? if we take a step back, i think there is a strong case for the fact that markets are not expecting too much out of negotiations at this point. bad news doesn't do much damage,
but more good news. let's get talks and that could push sterling even higher. that?how likely is the government looks like it is on the brink of falling apart. with no deal? geoffrey: what are we expecting when we get to march 2019? this is what the second part of negotiations should be about. how we transition onto the transition phase? --how do we transition onto the transition phase? until the government and leadership settles down, it will be hard to discern the strategy. at the 11th hour, it seemed like things would fall apart.
i think the markets have bad they don'tn mind, so want to punish sterling too much at this point. is -- when it is quicker things will fall apart, we will cross that road when we get here. for now, let's trade fundamentals, focus on the dollar and the euro move. stronger sterling, pushes down headline inflation, and given the labor market -- you probably need to take sterling -- take steam out of sterling at this point. it depends how households will respond. geoffrey yu is the head of the u.k. investment office and ubs wealth management. he will stick with us. him more fxsk
matt: we are 30 minutes into your trading day. let's get your top headlines. when tying the knot. councilmember calls for europe's qe program to end as soon as possible. thean bonds selloff with five-year yield hitting zero today for the first time since we 15. pressure mounts on may. while e.u. ministers sign off on terms for the brexit transition, u.k.'s by minister comes under fire from her own party. how long can sterling hold onto its gains? metals shine. sores while nikki -- while
nickel rallies. good morning. welcome to bloomberg markets, the european open. guy: you talked about what is happening with minors. they are the trade this morning with 30 minutes into the day. the market is barely budging. a flick of cold positive momentum -- a slick a call, positive momentum -- a split cyclical, positive momentum behind this story. volkswagen is doing well. stocks are trading strongly this morning. beingechnology sector driven strongly this morning. insurance, industrials doing reasonably well today. -- the bottom end of the market is the yield story. down byate is trading
.6%. utilities are trading lower. personal households and goods, telecoms, health care, that is where you are seeing weakness. that is the split you are seeing in the market at the sector level. it tells much more positive picture being generated from the european markets than the headline stories generates. let's get a bloomberg first word news update. the u.k. prime minister is fighting in multiple fronts this morning, as critics inside her government and party threatened to offend her plans for brexit and even her premiership. they believe philip hammond is plotting to deny them the quick break they want. donald trump had said he would take a tougher stance with the e.u.. dutch centralhe
bank said qe has done one it has been intended and is no longer needed. in the u.s., goldman sachs says we shouldn't write off this week's federal reserve meeting as a nonevent. hawkishect slightly upgrade language. in saudi arabia, kingdom holding company's all of its losses. shares surged again today after the chairman was released over the weekend. returned home on saturday after reaching a settlement with authorities. he will remain at the helm of the company. marse grammys, bruno received the most awards. year and songhe
were hisd of the year wins. --global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. thanks for a much. after seven weeks of decline, -- let's talk fx with geoffrey yu. when you look at the dollar, when you look at investors positioning and the dollar? can it fall much further than this, or do we need to see something else? geoffrey: there are two things to consider. first, are we back in the environment where the dollar is
a funding currency? that is not a bad thing, considering the last time this mid tod around the thousands is when the global economy was on an upswing. it wasn't until u.s. yields started to outpaced the u.s. funding, started to outpaced whentations, that is things turned around and we have the dollar-yen story and the dollar carry trade story. going back to the u.s. yields the story, how much additional juice can we price and in terms of the fed? when will it be a proper balance driven by the market realizing? that would trigger a recovery.
guy: i got the trade rated dollar on the screen. quite a lot of waiting on the downside. on the downside, we have to put on the --put into context, where is the u.s. trading? is, if the dollar is going to move further, when will these emerging markets pushback? it may be time to take a breather, but i think there is great tolerance and great delivery. as long as the global growth story is fragile, it won't take much to turn this picture. matt: how are people positioned? isn't everybody on one side of
this trade? geoffrey: a lot of positioning is still dollar cash. we talk about cash riccio's all the time. -- cash ratios all the time. risk in u.s. tech and u.s. equities. nothing in between. if it is time for the cash to move into stuff in between, again, it is one the u.s. whenes a high-yield is things will begin to change. it is not likely right now. guy: let's talk about reserve positioning. we have this chart appear. up here. you like the euro going forward from here. if you take a look over the last year, quite some way to go to get back to more historically
normal levels. geoffrey: that is the crucial question for fx markets. if that starts to happen, these asset managers know who will buy the euro perspective to what is happening in europe, because their path of allocation from a currently point of view has already changed. if you are going to see more reserve managers moved to the singapore model and swiss model and have greater diversification across assets, as it framework first. maybe the euro won't face that much. component is still strong, because it is ultimately by trade. how much does it matter?
last week the trade secretary said the weak dollar has helped the u.s. economy. no doubt there is evidence for that, but then you have donald trump come out and say he is for a strong dollar policy ultimately. no telling when that could mean. how much does this job owning from u.s. officials matter? geoffrey: you saw the ecb saying that wasn't helpful. privately, central bankers will be saying it is not helpful either. dollar policy is actually run by the treasury, not that are reserved. federal reserve can only condition that language to make sure there is some degree of consistency. it is going to be the comments from the administration at the end of the day. i don't think we will get too much help from washington in the near future. guy: great to see you this morning. is going to join us
as soon as possible. is europe, the eurozone in its totality capable of surviving with a significantly diminished stimulus program? growth is strong, but it is supercharged. what would the victory look like if we started to withdraw that? >> it is true we are seeing both stronger economic growth and broader based economic growth. e.u.ve all members of the growing positively. inflation is still relatively weak. core inflation remains weak. there is extraordinary stimulus keeping that growth going. we have been supportive of the to policy of continuing provide quantitative easing for sometime in the future and meet those criteria of a sustained increase in inflation towards the target before they withdraw that. guy: spreads have compressed massively across the continent.
we haveough greece, seen a significant spread of compression. are those a realistic expression of risk? in some countries, particularly high debt countries, there is a need for buffers.up fiscal now is the time for european countries who might be at risk in the future tighten on a trade policy to build a buffers necessary so the inshore is there isn't a problem when they withdraw and stimulus happens. you are talking about economic convergence in the euro area. has the populist movement we have seen reversed the strengthening, deepening of the european union? awayve seen the u.k. break , spain looking to get
independent. far right parties winning and further eastern european countries, ending goal -- and even angela merkel losing power, it seems, in germany. i think the research we have done on convergence suggests there has been a stalling of the convergence of in month -- convergence of incomes since the advent of the euro. that isn't to save the euro is the cause of that stagnation, but this technician could drive frustrations that result in populism. when you talk about eastern european companies, those countries that joined the euro after the initial establishment of the currency have converged nicely. we are talking the baltic states, slovakia, and others. the original member states,
there has not been the kind of convergence we would like to see. in countries that have lower income levels 20 years ago, they are not catching up with a couple of exceptions. that requires policies, particularly in a structural area, to help address. matt: what you think about the situation in greece? do you expect the imf to activate its program over the coming months, and do you expect the european creditors to come to agreement with imf on debt relief? jeffrey: we have an agreement in principle with greece right now. that means we have agreed on the policy package, fully supportive of the policies the greek government is undertaking, but we are waiting to find a full agreement with european partners on that debt relief to make that sustainable. those discussions on debt relief are underway now. we are optimistic we can come to a conclusion in the coming weeks fully activate our
program before the europeans finish their program. guy: how much further do europeans have to go? meter?n inch, a jeffrey: i couldn't give you a it is a smaller distance than it was before. we have been making progress steadily over the last year or two of discussions. we are in a position where we are potentially in striking distance in a deal on debt relief for the future. i have pulled this chart up in a have never known if i should take it seriously or not. --t line jeffrey: it reflects the overall positions of the countries. it is not necessarily a problem.
there is no reason that an internal imbalance of this nature -- guy: could this get bigger? jeffrey: potentially. those imbalances are handled within the framework. matt: how soon do you expect us to have banking union complete? everyone i talk to ask as if it might as well be done now. there is only a few loose ends to tie up. it seems like those will be difficult to what -- two tie up. stronglywe are supportive of the idea we need to complete the backstop to the banking union. that means a fiscal backstop to the single revolution fund. -- the single resolution fund. we think those two elements are absolutely necessary in order to have a banking union that
reduces risks for banks in europe. there are other issues that might be important by carmen and -- harmonizing insolvency regulations. the elements of completing the architecture on the banking side are those two. we were talking about the lack of technology that exists within europe earlier. it is not a european strength. after we start to gets to ability, macro stability within europe, europe needs to, but the plan for generating growth. the way u.s. generates growth. what is your view of what europe get beyond after we the crisis, after we get stability set up, after we get a sustainable europe that exists both on paper and in people's minds and in your reality -- and in reality? jeffrey: we have seen worldwide
a decline in productivity growth. it is not just a european problem. the decline in europe has been sharper. get higher growth from demographics, from capital investment. you will have to get it through productivity and technological innovation. technological innovation makeies will be critical, research and developing spending, education systems, technical trading, and it is going to need capital markets that can invest in startup companies. what i hear in several european countries is that some countries are guarded startups. others moved to silicon valley, because that is where the talent and venture capitalists are. that is the challenge europe is facing. matt: thank you so much for joining us. we appreciate your time this money. jeffrey franks, director of the imf in europe office giving us a morning.es this
i want to break news on noble group limited. it is reaching an agreement in principle on a debt restructuring, putting to bed, if it does reach that agreement completely, a saga that has lasted since 2015. let's get to nejra cehic for the stock movers of the day. at of link.looking they shares are holding. belgiumhis out from the regulator. it is pending the press release.
also looking at dialog semi conductor. it is improving its outlook. it seems it is moving largely on that, gaining the most since six timber. -- since september. ge.m looking at getin jp morgan says profitability came in materially below tosensus and also more cuts estimates are possible. this stock lost as much as 10% earlier, the most since 2014, now down 5.4%. 1 thanks very much for that. --matt: thanks very much for that. a new class of criminals. crypto crime gives regulators something novel to grapple with.